Search in:

More to be done on managing risk: APRA

Clancy Yeates and Philip Wen

Several international banks have already satisfied upcoming rules that will force lenders to hold more liquid assets, the regulator says, despite industry concerns the requirements are being implemented too quickly.

The comments came as the Australian Prudential Regulation Authority told the industry there was ''more work to be done'' in how it dealt with risk management.

Banks in Europe were granted a major reprieve last month, when global regulators delayed the starting date for new liquidity rules by four years, so that they did not commence until 2019.

Local banks are keenly awaiting APRA's decision on whether it will follow the lead of its peers overseas and soften the rules. A decision is expected soon.

APRA's chairman, John Laker, said on Wednesday the regulator had not yet put its proposal to industry on the liquidity coverage ratio, which will require banks to hold enough liquid assets to cover their lending outflows for a month. However, he also said there were ''a number of international banks'' that had already satisfied the rules, part of a set of regulations known as Basel III.

Dr Laker added the rationale of phasing in Basel III ''was to ensure the LCR can be introduced without material disruption to the orderly strengthening of banking systems or the ongoing financing of economic activity''.

The remarks come after the Australian Bankers' Association last month warned there was a danger domestic regulations would be out of sync with the rest of the world if it proceeded with the rules too quickly.

Dr Laker made the comments after saying a recent review had found many boards in the industry needed to lift their game in how they managed risks. Its December review of risk governance had found the typical board in the industry had received a score that was at the ''risky'' end of ''adequate''. Some boards received a ''high-risk'' score.

''This is confirmation that APRA has indeed raised its expectations for risk governance and there is more work to be done,'' he said.

Despite the need for improvement, Dr Laker said APRA would not adopt certain measures favoured by its British counterparts, including sitting in on board meetings and conducting rigorous interviews of prospective directors of banks and financial institutions.